Milford Investments Limited v Lanyon Bowdler LLP

This is my judgment on the Claimant’s claim for damages arising from the alleged negligence of the Defendant when acting for the Claimant in respect of a property development.

During the course of this judgment, reference is made to pages in the Trial Bundle in the format B***, where the asterisks represent the page numbers, save in the Agreed Chronology (which as I note below is the work of others) – in that document, the page numbers in the right hand column appear without the prefix “B”.

The Claimant is a company involved in property development. It is owned by a married couple, Mr Christopher Shaw (“Mr Shaw”) and Mrs Judith Shaw, Mr Shaw being its sole director.

The Defendant is a firm of solicitors, whose members included at the relevant times, Mr Ian Glenister and Mr Alan Gittins, both solicitors.

Mr Evans, Mrs Whitelaw, and Mr Whitelaw (collectively “the Owners”) were the registered proprietors of land lying to the south west of The Stores, Kinnerley, Oswestry registered under title number SL187487. At the southern end of this land was a plot of approximately 1.88 acres which the Owners intended to develop. Where there is any potential in which land is being referred to, I shall refer to this plot as “the Development Land.”

In their dealings with the Development Land, the Owners instructed Halls Estate Agents. Mr Giles of that firm acted for them and was involved in some of the relevant dealings.

I have been greatly assisted by the agreed schedule of facts prepared by counsel on behalf of the parties. It is valuable both for the detailed references to the relevant history and for the cross references to material parts of the bundle, including witness statements. I have annexed it to this judgment. I have however removed references to events after the issue of proceedings on 31 October 2018. Whilst those later matters may have procedural significance, they are not relevant to the issue of liability and quantum with which I have to deal.

In February 2014, the Owners applied for outline planning permission for a development of 12 homes on the Development Land.

In Autumn 2014, the Owners and Mr Shaw discussed a proposal by which the Owners would enter into a developer/landowner agreement with the Claimant. The Claimant would construct a development of 16 dwellings, financed by a bank loan, realising sales of approximately £3,755,000 of which the Owners would receive approximately £751,000. I shall use the term “the Development” for this proposal and the term “the Joint Venture” for the broad plan of the Owners and Mr Shaw together with the Claimant to pursue the Development.

Both the Claimant and the Owners were established clients of the Defendant, the Claimant having previously worked with Mr Glenister, and the Owners with Mr Gittins. They each agreed to instruct the Defendant to act for them. There is no dispute that, at the time relevant to the matters complained of by the Claimant, the Defendant was retained by the Claimant to advise and act for it in respect of the Joint Venture and that the Defendant owed to the Claimant the usual duty to take reasonable care in the services provided pursuant to that retainer.

In March 2015 the planning authority, Shropshire Council (“the Council”), granted outline planning permission for a development of 12 homes at the Development Land. It was clear that the grant of permission would be subject to a satisfactory agreement under Section 106 of the Town and Country Planning Act 1990 being entered into by the Council and the Owners (Footnote: ¹).

In Autumn 2015 the proposed structure of the Joint Venture was changed. Instead of a developer/landowner agreement between the Claimant and the Owners, it was agreed that they would form an LLP (ultimately called Wallace (Kinnerley) LLP, but referred to in this judgment as “the LLP”) which would develop the land. The Owners would retain the Development Land. The LLP would obtain the finance for the Development and would commission the Claimant to manage the Development. This was a structure which Mr Shaw had previously used in another development (known as “the Cholmondeley development”), and on which Mr Glenister had been instructed to act for him.

From October 2015 to March 2016 Mr Glenister and Mr Gittins drafted the agreements for the new form of the Joint Venture. They consisted of (a) the LLP Agreement, (b) the Development Agreement, (c) the Development Management Agreement, (d) a Legal Charge, and (e) a guarantee by Mr and Mrs Shaw in favour of the Owners. Together, these agreements are called “the Agreements.” However, it becomes important for what happened hereafter to distinguish between the LLP Agreement and the other agreements, and I therefore use the term “the Other Agreements” to refer to the Agreements other than the LLP Agreement.

The Development Agreement was a central part of the arrangements between the parties, providing for the core terms of the Joint Venture between the Owners and the LLP. Amongst other things, the Development Agreement provided that the Owners were to enter into a Section 106 agreement promptly on request by the LLP provided that it was in a form approved by them (acting reasonably), and that, if the Council had not issued a ‘decision notice’ granting planning permission by the end of the ‘Application Period’ (which in the event expired on 10 September 2017), then either party was at liberty to rescind the Development Agreement.

Once final versions of the Agreements were ready, the parties signed them in early March 2016. The LLP Agreement was signed by the Owners and the Claimant as “partners,” the LLP and Mr Shaw and his wife as guarantors. The Other Agreements were signed by the Owners of the one part and Mr Whitelaw on behalf of the LLP of the other part.

On 11 March 2016, Mr Glenister and Mr Gittins applied to incorporate the LLP by sending the relevant form to Companies House. The form was received by Companies House on 12 March 2016, and in due course a certificate of incorporation was issued recording that the LLP had been incorporated on 25 March 2016.

Separately, in the spring/summer of 2016 another business connected with Mr Shaw acquired a separate development site at Argoed Road, Kinnerley, Oswestry. This site, known as “Willow Grove,” is situated very close to the Development Land. The Willow Grove site was acquired by another LLP, MW2 Kinnerley LLP, which is a joint venture between the Claimant (which holds a 50% interest) and a number of third-party investors who provided development funding.

On 6 June 2016, the Owners made a ‘reserved matters’ planning application to amend the existing outline planning permission to increase to 18 the number of homes that could be built on the Development Land. In July 2016, the Council advised that it would not be possible to use a ‘reserved matters’ application to increase the number of homes in this way.

On 13 October 2016, the Claimant made a full application for planning permission for a development of 18 homes. That application was considered by the Council on 28 February 2017 and deferred for one month. The Council then resolved to grant full planning permission for 18 homes on 28 March 2017, subject to (amongst other things) the conclusion of a Section 106 agreement with the Owners.

From April 2016 onwards, there had been various discussions and correspondence concerning a potential outright purchase of the Development Land by the Claimant or Mr Shaw, as an alternative to continuing with the Joint Venture. Mr Shaw made an offer to purchase in May 2016. This was not accepted. By February 2017, Mr Shaw had learned that the Owners were offering to sell the Development Land to third parties, notwithstanding that they had not pulled out of the Joint Venture. After the Council deferred the decision on the full planning application in February 2017, Mr Shaw made a further offer to buy the Development Land for £400,000, with an option to buy additional adjacent land for £100,000. In the meantime, the Claimant continued to try to negotiate the terms of a fresh section 106 agreement with the Council.

In April 2017, the Claimant and the Owners reached agreement in principle for the Claimant to purchase the Development Land from the Defendant for £512,000. Mr Glenister and Mr Gittins were instructed to prepare the necessary contracts and transfers.

However, by mid-July 2017 the purchase had not completed and the Section 106 agreement had still not been agreed with the Council. Mr Shaw expressed his frustration to Mr Whitelaw in an email of 17 July 2017:

“The Planners have seemingly become no less frustrating or incompetent.

We still await a draft S106 and our most recent chase to them provoked a response seeking any proposal for us to extend the School parking provision as a consequence of the increase in numbers. We therefore anticipate a potential further delay negotiating the draft when it eventually arrives should they try to sneak through some extra conditions.

Not only does this delay compromise our position as the 10th September deadline for securing the S106 under the terms of the JV agreement looms closer but we are further frustrated by having had to set aside and earmark the purchase money which is in-effect our business and group working capital.

We are clearly in a precarious position where we may not be able to satisfy the terms of the JV agreement having invested in excess of £65,000 on legal fees, the JV fee, planning fees and the application fee.

In the circumstances, we have decided to reluctantly commit our capital elsewhere for now where it can immediately be put to more effective use. This will prevent us spending more money on abortive legal fees and compounding our loss should, as it would appear likely, we are not able to satisfy the terms of the agreement.

[Clearly] (Footnote: ²) if the S106 does appear before the 10th September and in a form acceptable, then we will continue to rely of the terms of the LLP agreement and of course it may be that we can resurrect the revised and preferred proposal by the landowner to sell the land to us when our capital becomes available.”

On 19 July 2017, Mr Shaw confirmed his withdrawal from the potential purchase, putting his position in this way in an email to Mr Giles of Halls Estate Agents:

“I can no longer starve my companies waiting for this deal which is dragging on too long and it now appears I will lose in the long run in any event due to the timings in the JV LLP not being met. I am also eager for the mounting legal costs to be halted!! I have therefore had to commit my funds elsewhere and in the unlikely event that the 106 lands in time then we will rely on the JV for now and may be able to resurrect an outright sale when these funds come back in.”

In mid-August 2017, the terms of the Section 106 Agreement were finalised, and Mr Glenister provided engrossments to Mr Gittins for the Owners to sign. However, Mr Whitelaw informed Mr Gittins that he did not wish to continue to pursue the Joint Venture. Mr Gittins therefore informed the Owners that the Defendant would cease acting for them because of the conflict of interest with the Claimant.

The Owners instructed new solicitors, DTM, who wrote to Mr Glenister on 31 August 2017 stating that the Other Agreements were invalid and unenforceable because the LLP had not been incorporated on 11 March 2016 when the Other Agreements were executed. The Owners did not execute the Section 106 Agreement prior to the 10 September 2017 deadline in the Development Agreement and declined to proceed with the joint venture with the Claimant.

Thereafter the Owners pursued an outright sale of the Development Land. They made a purported Part 36 offer to the Claimant on 11 October 2017, open for 7 days, which involved C being given first refusal to purchase the land for £500,000. However, in the event the Owners sold the Development Land to a third party, Village Artisan Ltd (“Artisan”). On 13 March 2019, Artisan entered into a Section 106 agreement with the Council pursuant to the full planning permission obtained in March 2017. Later Artisan obtained a variation of the permission (referred to as a Section 73 variation) to increase the size of some of the dwellings. Artisan completed the development of houses on the land with these variations.

In summary, the Claimant’s case is that the Defendant, in breach of its duty of care, failed to ensure that the LLP was incorporated prior to the Agreements being signed. The failure to ensure this enabled the Owners to withdraw from the various agreements and sell the Development Land to a third party, causing loss to the Claimant.

The Claimant’s claim as put at trial can be seen from the summary in the updated Schedule of Loss at B75. The figures as set out in that document are a little difficult to follow. In summary, that claims is:

The figure for loss of profit on the development set out in the previous paragraph is made up as follows:

The Defendant’s counter schedule at B76 puts the loss of development profit as follows:

The figure for loss of profit on the development is made up as follows:

Unlike the Claimant, the Defendant’s figures make no allowance for increased profits on Section 73 variations. However, this difference is commented on in paragraph 2.6 of the Experts’ Joint statement at B648. In essence, if the variations pleaded by the Claimant are to be factored in, these can be costed on the same basis as the experts contend for in respect of the original development proposal.

It will be noted that there is a claim for “additional losses” said to be the Claimant’s administrative costs and legal fees in the Claimant’s Schedule and a deduction of the same fees in the Defendant’s counter schedule. For reasons I shall identify, these are in fact not relevant to the Claimant’s loss, whether by way of addition to its loss of profits on the scheme or as a deduction on account of their being a cost of the scheme.

The following issues arise in the light of how the parties put their cases:

During the trial, I heard from Mr Shaw on behalf of the Claimant, who had signed witness statements dated 23 January 2023, 12 July 2023, 15 September 2023, 8 December 2023, 19 January 2024 and 8 February 2024. Of these six statements, the fifth, dated 19 January 2024, was the trial statement and other statements were prepared to deal with several interlocutory issues, particularly relating to disclosure, but I have read each of the statements. The third, fourth and fifth statements were confirmed by Mr Shaw as being true to the best of his knowledge and belief at the beginning of his evidence. I treat the contents of those statements as being his relevant evidence in chief for the purpose of this judgment. For the Defendant, reliance was placed on the evidence of Mr Glenister who signed a statement dated 29 November 2022.

The credibility of Mr Shaw is a central issue in this case. The Defendant mounted a full blooded attack on his evidence, arguing that he was dishonest in certain correspondence and that that dishonesty tainted his evidence more generally.

I found Mr Shaw to be an engaging witness who expressed passion about some of the matters of which he spoke, including his track record as a property developer. On the other hand, he acknowledged several times that what he had had to say in correspondence represented no more than a negotiating position or an attempt to create a favourable backstop position for his company. Some of what he had to say in correspondence did not reflect his true position and/or intentions. Whether that is correctly categorised as dishonesty or lying may be a matter of semantics as far as the present litigation is concerned. However, his evidence left me in doubt as to the extent to which I could place reliance upon what he had to say. I have no reason to doubt that he meant his oath before he gave evidence, but his acceptance that he had asserted matters that were not in fact factually correct calls me to be cautious about placing reliance upon those parts of his evidence as are unsupported by other material, the more so when other material contradicts such evidence.

The problem is exacerbated by the failure of his witness statements to comply with Practice Direction 57AC. His statements clearly contain many expressions of opinion, often involving commentary upon documents and at points involve simply advancing his company’s case. The Defendant did not seek to attempt to argue that his evidence should not be admitted. That was a reasonable and pragmatic stance. Nevertheless, as Fancourt J said in Greencastle v Payne [2022] EWHC 438, non-compliance with the Practice Direction is not simply a matter between the parties. The result of witnesses ignoring not only the Practice Direction but also the proper ambit of witness evidence is to make the untangling of what is admissible evidence and what is simply comment, opinion, argument or hearsay evidence, substantially more difficult for the trial Judge. Often the result of the failure of the parties to have regard to the proper role of the lay witness as someone who gives evidence of that which they have themselves witnessed (or occasionally evidence of what others have said to them, as admissible hearsay) is to put the court in the position in which it is liable to treat that evidence as simple argument rather than anything upon which reliance can be placed.

I have sought to distinguish in this judgment between that which can properly be considered as Mr Shaw’s direct evidence of matters that he witnessed or other matters that he can speak to on the one hand and on the other matters of comment, unattributable hearsay or the similar. If in so doing I have erred on a side that is unfavourable to the reliability of Mr Shaw as a witness, that is a consequence of the manner in which his evidence was prepared, the obvious failure to comply with the Practice Direction and the difficulty in identifying at times whether he is speaking of matters within his own knowledge or matters that he has been told by others. He is, I am afraid, the author of his own misfortune in this respect.

At the beginning of his cross examination of Mr Glenister, Mr Phillips, for the Claimant, expressly made clear Mr Shaw's recognition that Mr Glenister had contributed to the success of his property development. That is to Mr Shaw's credit. Whilst what counsel says in the context of cross examination is not of course evidence in the case, I bear in mind as a feature of my assessment of Mr Shaw’s credibility that he had the decency to express through counsel sympathetic views to Mr Glenister.

In any event, I did not find all of Mr Shaw’s evidence to be implausible. For example, during cross examination as to the crucial role that adequate finance plays in his business, he put it at one point that this is a “cash hungry business.” The availability of funds is crucial to successful property development. He makes a similar point at paragraph 8.2 of his witness statement where he says:

“When running a successful development, it is essential to have a well thought out and pre-planned structure, in order to achieve efficiency and to manage expectations, which is effectively dictated by the ability and means of the parties involved, to bring what they can to the table. In circumstances where it has purchased the land itself (either outright, or through bank funding or private investment finance), the Claimant develops the land directly (with no third-party involvement), as its own project. Where the Claimant does not own the development land, the landowner's part of the bargain is to introduce encumbrance free land to the deal, which is very appealing to the Claimant and I but involves us undertaking a different and more complex development structure, which brings the significant advantage that the risks are spread and distributed between the parties (which does not happen in a developer owned land deal).”

This evidence is consistent with the material that Mr Shaw put before the court as to how the Claimant carried on business. This approach is an important part of Mr Shaw’s strategy for property development both in the scheme with which this case is concerned and in other schemes. The use of a joint venture scheme with the landowner both spreads the risk and avoids the need for Mr Shaw’s own companies to fund the development, but brings with it complications, including as to the cooperation of the landowner in the scheme.

Mr Glenister gave his evidence in a clear and straightforward fashion. I found no reason to doubt that he was a witness who was trying to assist the court. In any event, little of what he had to say was controversial.

I heard from expert witnesses for both parties, as follows:

All the experts sought to assist in this case. They all acknowledged that there might be a range of opinions on the issues before the court and sought to explain their positions within the range. In fact, the evidence of the experts and the reasons for the differences between them took up a limited amount of the trial and played a relatively small part in the parties’ submissions, reflecting their acknowledgement that there is a range of opinion on the issues before the court and that, save on certain narrow issues, neither side could show that the other side’s experts were obviously wrong.

The Defendant takes a preliminary issue on the pleadings. At paragraph 20 of the Particulars of Claim, the Claimant pleads the following in respect of the enforceability of the Development Agreement:

“As the Defendant knew or ought to have known:

(a)

a contract purportedly entered into by a limited liability partnership prior to its incorporation is of no effect, save that:

(i)

by section 51 of the Companies Act 2006 (as applied to limited liability partnerships with relevant modifications by Reg. 7 of The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009), subject to any agreement to the contrary, such a contract would be deemed to be made with the person purporting to act for the limited liability partnership or as agent for it;

(ii)

by section 5(2) of the Limited Liability Partnerships Act 2000 (s. 5(2)), an agreement made before the incorporation of a limited liability partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership (to take effect at any time after its incorporation);

(b)

since the Development Agreement was purportedly entered into by the LLP prior to its incorporation, there was no binding contract between the Owners and the LLP. There was at best a contract between the Owners and Mr Whitelaw as purported agent of the LLP;

(c)

since the LLP Agreement was purportedly entered into by the LLP prior to its incorporation, the LLP could be subject to obligations upon incorporation pursuant to s. 5(2), but could not acquire any rights. In particular, the LLP could not acquire the right to require the Owners to enter into the Development Agreement.”

The Claimant pleads its case on breach of duty at paragraph 31 of the Particulars of Claim. There are six pleaded allegations of negligence, namely:

“(a)

Failing to have the LLP incorporated prior to the execution of the Agreements.

(b)

Permitting the parties to the Agreements to execute them when the Defendant knew or ought to have known that the LLP had not been incorporated, alternatively without first checking that the LLP had been incorporated.

(c)

Failing to appreciate at the time of execution of the Agreements or subsequently that the LLP had not been incorporated when those agreements were executed.

(d)

Failing to advise the Claimant at the time of execution of the Agreements or subsequently that the effect of the LLP not having been incorporated at the time of execution was as set out in paragraph 19 above.

(e)

Failing to advise the Claimant in the circumstances set out in the foregoing sub-paragraph that:

(i)

it should insist upon the Agreements being re-executed following the incorporation of the LLP; and

(ii)

in the event that the Owners would not agree to the re-execution of those agreements, that it should not do anything in reliance upon them.”

The Claimant’s pleaded case on causation is at paragraph 32 of the Particulars of Claim:

“(a)

Had the Defendant ensured that the Agreements were executed after the incorporation of the LLP then they would have been binding on the Owners for the benefit of the LLP and the Owners would not have been able to refuse to execute the s.106 Agreement without being in breach of the terms of the Development Agreement.

(b)

Had the Defendant advised the Claimant of the invalidity of the Agreements in or around March 2016 or at any subsequent time prior to April 2017, there is no reason to doubt that the Owners would have been willing to re-execute those agreements, which would have then have been binding upon the Owners for the benefit of the LLP. The Owners and the Claimant were on friendly terms. But for the intervention of the estate agent in April 2017 and the subsequent advice of DTM (which could not have been given but for the Defendant’s breaches of duty), the Owners would have been happy to allow the LLP and the Claimant to proceed with the Permitted Development through to completion.

(c)

Had the Agreements been binding upon the Owners, then the Permitted Development would have been completed and the Claimant would have made a substantial profit therefrom. For the avoidance of doubt, the Claimant would have been able to comply with its obligations to obtain bank funding for the Development and provide the balance of any funding required.”

It is apparent that the Claimant’s case in the Particulars of Claim proceeds on the basis that the agreements signed before the incorporation of the LLP, specifically the Development Agreement, were not enforceable by reason of their being signed before the LLP Agreement. However, I note in passing that the pleading does not expressly plead this as a part of the causation case.

In its Defence, the Defendant pleaded that the Development Agreement was in fact enforceable, relying on the terms of Section 5(2) of the Limited Liability Partnerships Act 2000 (“the 2000 Act”).

The Claimant, in its Reply, joins issue with this, pleading at paragraph 11(2) that, “Even if the Defendant’s construction is correct (which is denied), the Claimant avers that a solicitor taking reasonable skill and care would have advised that the LLP should formally join the LLP Agreement after its incorporation and/or drafted the LLP Agreement in such a manner to achieve this.” During closing submission, the Defendant contended that the argument pleaded in the Reply was not open to the Claimant since it had not been pleaded in the body of the Particulars of Claim, whether as originally drafted or by way of amendment.

The law in this regard was considered and helpful summarised by Pepperall J in Martlett Homes Ltd v Mulalley & Co Ltd [2021] EWHC 296 (TCC):

“17.

Particulars of Claim must include, among other matters, "a concise statement of the facts on which the claimant relies": r.16.4(1)(a). Where a defendant denies an allegation in the Particulars of Claim, r.16.5(2) provides that:

"(a)

he must state his reasons for doing so; and

(b)

if he intends to put forward a different version of events from that given by the claimant, he must state his own version."

18.

Pleading a Reply is, however, optional: rr.15.8 and 16.7, and (in this court) paragraph 5.5.3 of the TCC Guide. Indeed, a claimant who does not file a Reply is not taken to admit the matters raised in the Defence: r.16.7. While the rules give little guidance to what can be pleaded in a Reply, paragraph 9.2 of Practice Direction 16 provides:

"A subsequent statement of case must not contradict or be inconsistent with an earlier one; for example, a reply to a defence must not bring in a new claim. Where new matters have come to light the appropriate course may be to seek the court's permission to amend the statement of case."

19.

No party may serve a statement of case after a Reply without the permission of the court: r.15.9. While a Reply is reasonably commonplace, the editors of the 2020 edition of Civil Procedure (the White Book) rightly observe, at paragraph 15.9.1, that permission to serve subsequent statements of case will only be appropriate in the most exceptional circumstances and that the court is more likely to permit amendments to earlier statements of case.

20.

In my judgment, the terms of r.16.4(1)(a), the optional nature of the Reply, the rule restricting subsequent statements of case and the terms of the Practice Direction all point to the clear conclusion that any ground of claim must be pleaded in the Particulars of Claim. New claims must be added by amending the Particulars of Claim and cannot simply be pleaded by way of Reply. I reject Mr Selby's submission that such view would deprive the Reply of all purpose. A Reply can be particularly useful in order to refute a ground of defence. For example, a Reply can properly plead:

20.1

a later date of knowledge pursuant to ss.14 or 14A of the Limitation Act 1980, or that the court should disapply the primary limitation period pursuant to ss.32A or 33 of the Act, in answer to a plea in the Defence that the claim is statute barred;

20.2

that an exemption or limitation clause was not incorporated into the parties' contract or that it was of no effect in excluding or limiting liability because the clause did not satisfy the condition of reasonableness within the meaning of the Unfair Contract Terms Act 1977; or

20.3

that the defendant is estopped by some earlier judgment or representation from relying upon a particular defence.

21.

In each example, the claimant would be pleading new facts in order to refute a defence, but it would not be pleading a new claim. Equally, while there is no obligation to respond upon the facts, a Reply can usefully admit a fact alleged in the Defence (thereby avoiding the cost and trouble of needing to prove the fact and allowing the court and parties to focus on the real issues) while explaining why such admitted fact does not provide a defence to the claim. Or a Reply can deny an allegation of fact and usefully explain why such allegation must be wrong.

22.

Not only is the proposition that one can advance a new claim in a Reply contrary to the clear terms of the Practice Direction, but it is also inherently undesirable and contrary to the overriding objective of dealing with cases justly and at proportionate cost. If such practice were to be condoned, claimants would not need to be precise in their formulation of the Particulars of Claim since they could always have a second bite of the cherry when pleading the Reply. Defendants would have to seek permission from the court in order to answer by way of Rejoinder any new claims pleaded in the Reply, which might in turn call for a Surrejoinder from the claimant. Further, a claimant seeking to bring a new claim after the expiry of the limitation period could sidestep r.17.4 altogether (although possibly not s.35 of the Limitation Act 1980) by avoiding the need to make any amendment.”

These principles apply with the same force in the Circuit Commercial Court as they do in the Technology and Construction Court. But it is important to look at the detail of what the Claimant is seeking to argue across the pleadings. The argument within the Particulars of Claim may seem to be that the Development Agreement should not have been signed before the LLP was incorporated on the grounds that such an agreement was inevitably and as a matter of law unenforceable. But the pleaded case at paragraphs 31 and 32 in particular does not rely upon it being so. It is also open to the Claimant on the pleading in the Particulars of Claim to contend that the Defendant was in breach of duty if it brought about a situation in which the Development Agreement was arguably unenforceable because the LLP was not incorporated in advance. That seems to be the intention behind the pleading at paragraph 11(2) of the Reply and certainly the paragraph is capable of bearing that meaning. In that event, the Reply does not plead a new case.

That is not necessarily the end of the issue. If a party pleads a case that is misleading as to the true case that it is advancing, the court may exercise case management powers to prevent any unfairness to the opposing party. As I have indicated already, the Particulars of Claim were a clear pleading of a case based upon the argument that, as a matter of law, the Development Agreement was in fact unenforceable, even if they were in fact capable of bearing the separate meaning identified in the previous paragraph above. In closing submissions, the Claimant argued that the enforceability of the Development Agreement was not something that the court needed to determine, since it was sufficient that the result of the Defendant’s putative negligence was that it created a situation where the enforceability of the agreement was arguable. But this issue was pre-figured in the Reply and to some extent in the Claimant’s skeleton argument (Footnote: ⁶). In any event, it was competently and comprehensively addressed in closing submissions by both parties.

In my judgment, the Defendant was sufficiently on notice of the point being taken and had sufficient opportunity to deal with it as to lead me to decline to exercise any case management power to prevent it being argued now. To put the same point another way, I do not see that this trial would have taken any different course if the contents of paragraph 11(2) of the Reply had been pleaded in the Particulars of Claim and in particular the Defendant has not been prejudiced by the manner of the case being pleaded. In such circumstances, it is open to the Claimant to argue the case based on the arguable unenforceability of the Other Agreements and if my permission were required for this, I would have permitted it.

For reasons identified below in respect of Issue 3, I do not consider the determination of whether in fact the contracts between the LLP and the Owners were binding, notwithstanding that they were executed before the LLP Agreement, to be decisive of liability issues in the case. Nevertheless, whether it is arguably unenforceable is clearly relevant to those issues. Further, if I am wrong on the pleading point identified at Issue 1 above, such that the Claimant were limited to arguing that the pre-incorporation agreements are actually unenforceable, rather than merely arguably so, the enforceability of the contracts would be a relevant issue that I would have needed to determine. Yet further, the Defendant raises an issue of causation (dealt with at Issue 4 below), asserting that the Development Agreement was in fact enforceable and that the Claimant’s loss flowed from its failure to seek to enforce the agreement rather than any problem relating to the date of its signature. For these reasons, it is desirable that I deal with the law relating to the enforceability of the Other Agreements.

The procedure in respect of the incorporation of an LLP is set out in Sections 2 and 3 of the 2000 Act. It is common ground that the LLP was registered by certificate that states the date of incorporation to be 25 March 2016. It has not been argued that the true date of incorporation is other than the date on this certificate. It is further not in dispute that the Agreements were signed before this date and that therefore they pre-date incorporation of the LLP.

In arguing that the LLP was in fact bound by those contracts entered into before its incorporation, the Defendant relies on Section 5(2) of the 2000 Act. Section 5 in its entirety provides as follows:

“5 Relationship of members etc

(1)

Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the members of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its members, shall be governed—

(a)

by agreement between the members, or between the limited liability partnership and its members, or

(b)

in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).

(2)

An agreement made before the incorporation of a limited liability partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership (to take effect at any time after its incorporation).”

The Defendant contends that the effect of Section 5(2) is that the Development Agreement was binding on, and enforceable by, the LLP and was additionally enforceable by the members.

The Defendant’s analysis involves first looking at the position in respect of companies. Until the introduction of Section 36C of the Companies Act 1985 (Footnote: ⁷) (“the 1985 Act”), introduced by way of amendment of the original statute by Section 130(4) of the Companies Act 1989, the position at common law was that a person purporting to act on behalf of a non-existent company could not bind the company before its incorporation (see Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 41). Thus a pre-incorporation contract would, without more, be unenforceable.

The amended provisions of Section 36C of the 1985 Act state:

“36C. Pre-incorporation contracts, deeds and obligations.

(1)

A contract which purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly.

(2)

Subsection (1) applies –

(a)

to the making of a deed under the law of England and Wales or Northern Ireland, and

(b)

to the undertaking of an obligation under the law of Scotland as it applies to the making of a contract.”

In Braymist Ltd v The Wise Finance Co Ltd [2002] Ch 273, the Court of Appeal held that, in the words of Judge LJ, “[77] …section 36C(1) of the Companies Act 1985 not only provides a remedy for a person A, who has purported to enter into a contract with a company when it was unformed (the narrow view) but also imposed obligations enforceable against A’s wishes by the person purporting to act for or agent of the unformed company, B…” In so holding, Judge LJ explained at [84], “The insurmountable difficulty with the narrow view is that it requires section 36C(1) to be read as if it created a complete option for someone in A’s position, but never someone in B’s position, either to adopt or reject the contract, a choice to be made unilaterally by him, for good, or bad, or no reason. The statutory language could, of course, have been drafted so to provide. Instead section 36C(1) specifies that the contract has “effect”, language remote from the concept of an “option” or, as here, the wish of the party in A’s position to be protected from the consequences of the deemed contract simply because the bargain is no longer as commercially attractive as it once was.”

The Defendant contends that the 2000 Act borrows heavily from the Companies Act but in respect of pre-incorporation contracts goes further by expressly permitting the members of the partnership to enter into pre-incorporation contracts that bind the LLP following its incorporation. This is said to be consistent with:

To construe the words of Section 36C as being capable of imposing obligations on the LLP but not of creating rights that are enforceable by the LLP would, the Defendant contends, create the very difficulty that the decision in Braymist resolved in the context of limited companies and would be inconsistent with the reasoning of that judgment in that it would take the “narrow view” that Judge LJ rejected and create the very same problem as he noted in his judgment in that it would create an option in favour of the opposing party as to whether it sought to enforce obligations against the LLP without giving any corresponding right in the LLP itself to enforce its rights under the agreement, a result that was probably not the intention of the drafting and that would require express wording to bring about.

In response, the Claimant contends that Section 5(2) of the 2000 Act is concerned with a different situation than that dealt with by Section 36C of the 1985 Act and considered in Braymist. It is concerned not with rights and obligations between the (intended) LLP and third parties but rather the rights and obligations as between the LLP and its members. The relevant agreements to which Section 5(2) relates are agreements made before incorporation between the intended members (“the person who subscribe their names to the incorporation document”) not between the intended LLP and the world at large. Thus, Braymist provides no assistance as to the proper construction of Section 5(2) of the 2000 Act.

On its true construction, the Claimant contends that Section 5(2) could not have availed the LLP here because:

In my judgment, it is clear that there is legitimate debate about the proper construction of Section 5(2) of the 2000 Act. A solicitor who wished to give effect to the Claimant’s intention that a binding agreement be entered into between the LLP and the Owners could not with any confidence have concluded in 2016 that the true construction of Section 5(2) was undoubtedly that the Other Agreements, specifically the Development Agreement, would be enforceable in the event that it was signed before the LLP Agreement was signed. Rather they would have recognised that this was a ripe area for dispute and one that was best avoided by ensuring that the LLP Agreement was entered into first.

Given my conclusion on Issue 3, my conclusion on the true construction of Section 5(2) is strictly obiter. Had it been necessary to rule on its construction, my conclusion would have been:

As the Defendant pointed out, this leaves the further question as to whether the Other Agreements were in fact agreements made by the parties who subscribed to the LLP such that they could be enforced by the members of the LLP. The Defendant does not dispute the Claimant’s contentions that the proper reading of Section 5(2) is that, for the provision to apply, the relevant agreement needs to be one “between” all of the parties who subscribed to the LLP. Further, they accept that the Claimant is not named as a party to the Other Agreements. But the Defendant points out that all of the subscribers to the LLP, including the Claimant, clearly intended the LLP to be bound by the Other Agreements, especially the Development Agreement, as demonstrated by the words of the LLP Agreement itself (see for example clauses 7.1 and 7.3). Further, both the Claimant and the Owners behaved as though both the LLP and the Owners were bound by the Development Agreement. The Defendant contends that the court should draw from this the conclusion that the Other Agreements were in fact made by the subscribers to the LLP.

Accepting that the relevant contracts need to be entered into by all the subscribers, I am unpersuaded by the argument that the Other Agreements can be said to have been entered into “between the persons who subscribe(d) their names to the incorporation document” where the Claimant was such a subscriber but was not a signatory to the Other Agreements. Whilst it certainly wished the Other Agreements to be binding, if it cannot in fact be shown to have signed those agreements and since they related to obligations between the (at the time) non-existent LLP and the Owners, I cannot see a basis for concluding that it could be said to have intended to be a party to those agreements. In the absence of such intent and some objective evidence that he became a party to the agreements, I conclude that the Other Agreements are not contracts to which Section 5(2) is capable of applying and that accordingly the Claimant could not have enforced the Development Agreement.

The Defendant further argues that, if Section 5 of the 2000 Act does not avail the Claimant, then the members or some of them could have argued that the Other Agreements were enforceable as agreements entered into before incorporation under Section 51 of the Companies Act 2006.

However the Defendant’s case does not adequately explain how a document signed by Mr Whitelaw on behalf of the LLP is enforceable by another member of the LLP who did not sign the agreement. Such an argument could only succeed if it were shown that Mr Whitelaw was acting as agent for the other member, presumably in this case the Claimant. But that is not the basis on which Mr Whitelaw purported to sign the agreement; rather he was signing as agent for the unincorporated and therefore, as of then, non-existent LLP. I see nothing in agency law in general or Section 51 in particular that could make him the Claimant’s agent.

It follows from this that:

The Defendant argues that it was not negligent in failing to ensure that the LLP was incorporated before the Other Agreements, specifically the Development Agreement, were entered into. The case is put baldly in the Defendant’s skeleton argument:

“…not all mistakes are negligent. The statutory provisions of the LLP Act 2000 and their effect has been the subject of considerable uncertainty (even now there is very little guidance on the operation of s.5(2) of the LLP Act 2000). A timing mistake made by a solicitor on the particular facts of this case does not amount to a breach of the reasonable skill and care expected of a competent transactional solicitor.”

Within his witness statement, Mr Glenister does not explain the reasoning behind not ensuring that the LLP was incorporated before executing the Other Agreements on behalf of the LLP. During cross examination, he was asked about this. In particular, he was taken to an email dated 21 January 2016 from Mr Shaw to Mr Simon Haynes, an accountant at Colin F Whitfield & Co, accountants instructed by the Claimant. In that email at B1100, Mr Shaw refers to the intention of the parties to sign all agreements before the end of that month and Mr Shaw adds the comment “before signing the NEW CO LLP will need to be established.” Of this comment, Mr Glenister said that it would be “logical” to incorporate the LLP before signing the Other Agreements. As the Claimant points out, the implication of Mr Glenister’s email of 9 October 2015 at B2149 is that the LLP would be incorporated before the Development Agreement was signed.

In closing submissions, the Defendant doubted that the risk of the Other Agreements being unenforceable as a result of the later signing of the LLP Agreement was foreseeable and was a risk that a reasonably competent solicitor would have had in mind when dealing with the sequence and timing of execution of documents.

If the law in respect of pre-incorporation contracts relating to LLPs had been clear to the effect that a contract entered into in the name of the LLP before the LLP was incorporated was binding on the LLP once incorporated this might be so. For reasons that I have already identified, it is not.

Equally, had Mr Glenister been able to give a clear account as to why he had concluded that the pre-incorporation contract here was enforceable, there might be force in the argument that it was not negligent to execute the Other Agreements before the LLP was incorporated, although even then it would appear to have been an unnecessary risk to take. However, there is no evidence that Mr Glenister gave any consideration to this issue. Rather, his advice and conduct of the case left the Claimant in the dilemma that the Owners had available to them an argument as to the effect of the law on pre-incorporation contracts, allowing them to advance a persuasive case that in fact the LLP was not bound by the Other Agreements, putting at risk the whole development scheme. As I have indicated above, such an argument is certainly not doomed to failure.

The proper approach to be taken where a solicitor is dealing with matters that might involve legal uncertainty and the creation of an unnecessary risk is considered in Jackson and Powell on Professional Liability, 9^th Edⁿ, at [11-104]:

“Where the solicitor creates, or incurs, unnecessary risks, he is likely to be held liable for any consequential loss, however carefully he may have handled those risks and however skilfully he may have calculated the prospects of success at the outset. In CW Dixey Sons Ltd v Parsons (1964) 192 E.G. 197, the defendant solicitors acted for the plaintiffs in granting a sub-lease of premises. Clause 2(10) of the head lease provided that the premises should not be used as a medical or quasi-medical establishment. The sub-lease as drafted by the defendants allowed the sub-lessee to use the premises for the purposes of a psychologist’s consulting room. The head landlords took the view that this use infringed cl.2(10) of the head-lease and brought forfeiture proceedings, which were compromised. Salmon LJ (sitting as an additional judge of the Queen’s Bench Division) held that the defendants were negligent, and would have been negligent even if the use in question did not infringe cl.2(10):

‘In the present circumstances the solicitor owed a duty to his client to take reasonable care, not only to protect his client against committing a breach of the law but to protect him against a risk of being involved in litigation … In preparing a lease, as in the present case, a solicitor was presented with what was an obvious danger. It would not do for him to say that in his view it was all right. There was an obvious danger that a different view might be taken. In the present circumstances the ordinary careful solicitor would have gone to see his clients and advised them not to sign’.”

On the available evidence, I am left in no doubt that the execution of the various agreements before incorporation of the LLP led to the risk that came to pass of one of the parties to the LLP Agreement arguing that the Other Agreements were not binding on the LLP. That was an obvious danger and the order of executing documents was, as Mr Glenister acknowledged, not the logical sequence of events. This is a classic example of the conduct of the solicitor creating a risk that the validity of the Other Agreements might be challenged.

Further, it was foreseeable that, if a technical point could be taken about the validity of the Other Agreements, it might be. The very point of entering into a written contract, rather than simply acting on trust, was to ensure that the parties were committed to a particular course of action. As Warren J said in Youlton v Charles Russell [2010] EWHC1032 (Ch) at [262], “a client cannot expect an agreement to be 100% watertight and to be incapable of challenge. But the need to accept seepage from the water-container does not excuse a failure to plug a leak.” The failure to ensure that the LLP was incorporated before the Other Agreements was an obvious “leak.” A reasonably competent solicitor would have sought to ensure that the LLP was incorporated first and were it to appear that this was not going to happen, would have advised of the consequent risk of unenforceability.

Of course, the solicitor’s client might have chosen to run the risk of documents being executed in a different order, perhaps because the exigencies of the situation and the risk of a deal falling through meant that the client judged it to be worth the risk of executing documents in a different order. There is however no logical reason here why the Claimant would have done this, nor does the Defendant allege any facts or matters that might have justified the risk being taken.

In those circumstances, I am satisfied that, in failing to take steps to ensure that the LLP Agreement was incorporated before the Other Agreements, or at the very least advising the Claimant of the risk of executing those documents before incorporating the LLP, the conduct of the Defendant fell below the standard of the reasonably competent solicitor and was a breach of its duty of care to the Claimant and/or was a breach of the implied terms of its retainer to exercise reasonable care in advising and acting for the Claimant.

The legal approach to causation in negligence is set out in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 at [6] by reference to a six-part test:

It is common ground that the Claimant’s claim is one for the loss of a chance to develop the land. Such loss is actionable in negligence. Given that the purpose of the retainer was that the Defendant should advise the Claimant in respect of that development and carry out services ancillary thereto, I see no difficulty in the Claimant satisfying the scope of duty requirement. I have found breach of duty to be established and there is a clear and obvious nexus between the duty and the loss sought. That then leaves questions of factual causation and legal responsibility.

To succeed in its claim the Claimant needs to show that its failure to develop the Development Land flowed in whole or in part from the Defendant’s breach of duty not from some other cause. Determination of the factual causation issue involves consideration of:

However, the Defendant raises prior issues of legal responsibility, namely that the failure of the Claimant to develop the land was in fact caused by the Claimant’s failure to enforce the Development Agreement rather than any problem flowing from it being a pre-incorporation contract.

I have rejected the argument that the agreement was enforceable from the outset or at least from the date of incorporation of the LLP, whether by the LLP itself or its members pursuant to Section 5 of the 2000 Act and/or Section 51 of the 2006 Act. It follows that the Claimant could not have enforced the Development Agreement and that the failure to serve notice of termination (a causation defence pleaded at paragraph 32.2 of the Amended Defence) is irrelevant since there was no valid agreement to terminate.

Even if I had found that the Development Agreement was in some way enforceable, I do not accept that the failure to seek to enforce it would have been a new intervening cause or in some other way have been a bar to recovery on legal responsibility grounds. I have noted the judgment of Salmon LJ in CW Dixey Sons Ltd v Parsons above. He held that the creation of the risk of the lease being forfeited on the grounds of the use of the premises in infringement of clause 2(10) was actionable even if the use had not been a breach of clause 2(10). This accords with the more general point made in the passage cited from Jackson and Powell above that the breach of duty consists in the creation of the risk of uncertainty. The legal responsibility that the solicitor in the position of the Defendant here bears is not simply the responsibility for loss caused if the Development Agreement was not in fact enforceable; it is also the loss caused by the risk of a contracting party arguing that it was not enforceable. If the risk itself were not foreseeable such a claim would fail on grounds that the solicitor had not acted in breach of duty where one could not have anticipated that the point about the enforceability of the agreement would be taken. But, as I have indicated above, on the instant facts it was clearly foreseeable that the Development Agreement might be challenged as a pre-incorporation contract and it follows that the legal responsibility test for liability is met. This does not of course prevent the Defendant from arguing that the breach was not in fact causative on the ground that the Claimant’s failure to take any steps to seek to enforce the Development Agreement is evidence that it had no desire to enforce the agreement and that it would not have done so even if it could have. I deal with this argument below.

In the alternative, it might be argued that the failure to seek to enforce the Development Agreement was a failure to take a reasonable step to mitigate loss. This argument falls within the case on mitigation pleaded at paragraph 32A.7 of the Amended Defence. I deal with mitigation more broadly under Issue 5 below. However, given my finding that the agreement was not in fact enforceable, it is not arguable that the Claimant should nevertheless have argued that it was. Such a course of action would have exposed the Claimant to costs on an issue upon which, given my finding, it would not have succeeded. Whilst it may have been reasonable to incur some cost in arguing the point, it was equally reasonable (or at least cannot be said to be unreasonable) not to have argued a point that was in fact wrong in law.

As alternative arguments, the Defendant contends in its pleading that those agreements became binding following incorporation of the LLP by ratification and/or that the Owners were estopped from denying that the LLP was bound by them.

The first of these arguments is pleaded at paragraph 31.2 of the Amended Defence. This argument was not however developed in the Defendant’s skeleton argument or in oral submissions and it was indicated on the Defendant’s behalf that this argument was not being pressed. This is perhaps unsurprising since the Defendant has not been able to identify when and by what means this ratification is said to have taken place, nor what in fact the legal effect of the alleged ratification is said to have been. The concept of ratification is usually a concept applied to the situation where an agent’s authority to bind its principal is in doubt. The position where the principle did not exist at the time of the alleged agency is somewhat different. The argument presumably is that the principal that comes into existence later adopts the contract and becomes a party thereto. Ratification in that sense would amount to varying the terms of the contract by the introduction of a new contracting party. It would need to be dealt with on conventional contractual principles about contract variation. It is unclear how those principles would apply on the facts of this case, and I am unpersuaded that the ratification argument could have assisted the Claimant in enforcing the Development Agreement.

The second argument, that of estoppel, may seem somewhat more promising. The evidence of Mr Shaw is that the parties behaved as though the Development Agreement were binding and I accept that counsel for the Defendant is probably correct in paragraph 90(c) of the skeleton argument to say that “it is apparent that the Owners believed themselves to be bound by the Agreements until they received advice from DTM to the contrary on or about 31 August 2017.” It is however difficult to judge whether an estoppel argument would have succeeded against the Owners.

As was noted during submissions, the decision of Harman J in River International Ltd v Cannon Film Sales Ltd [1987] BCLC 540 supports the argument that the Claimant could not have argued an estoppel by convention preventing the Owners from denying liability on pre-incorporation contracts where the convention relied on, the assumption of the existing of a binding contract, necessarily arose after the incorporation of the LLP. The authors of Chitty on Contracts, 35^th Edⁿ, doubt the correctness of the decision at [13-014]. But there is insufficiently clear material before the court to conclude that an estoppel argument would have succeeded. It might have persuaded the Owners to proceed with the Development, but the court could not conclude that, if the point had to be taken in litigation, the Claimant would necessarily have succeeded in the argument. In those circumstances, it cannot be said that the Claimant’s failure to advance the estoppel argument was the true cause of its loss. At best, the failure to do so might be argued to be a failure to take reasonable steps in mitigation of its loss. I deal with this issue further below.

Accordingly, I am not persuaded that there is any bar to recovery for the Claimant on “legal responsibility” grounds.

That therefore leads to the factual causation question. In determining causation in a solicitors’ negligence claim such as this, the court is concerned with a consideration of the counter factual: what would have happened but for the breach of duty? On this issue, the proper approach is to determine whether the chance of the Claimant having achieved a more favourable outcome but for the solicitor’s breach of duty was more than negligible and then for the court to assess that chance. Where, as here, the assessment of the chance depends at least in part on hypothetical matters, the court’s task was explained by the Supreme Court in Perry v Raleys Solicitors [2020] AC 352 at [20]:

“…the courts have developed a clear and common-sense dividing line between those matters which the client must prove, and those which may better be assessed upon the basis of the evaluation of a lost chance. To the extent (if at all) that the question whether the client would have been better off depends upon what the client would have done upon receipt of competent advice, this must be proved by the claimant upon the balance of probabilities. To the extent that the supposed beneficial outcome depends upon what others would have done, this depends upon a loss of a chance evaluation.”

The rationale for this bifurcated approach is in part the difficulty for the court in assessing counterfactual outcomes where the person whose actions or decision would have determined those outcomes is not before the court. In the instant case, the Owners’ actions but for the breach of duty that I have identified are inevitably a matter of speculation. They have not been called to give evidence nor have they given disclosure on matters that may be relevant to those issues. Neither party was duty bound to call them or to seek disclosure from them and it is hardly surprising that neither party did so. This leaves the court in the position of having to make the best judgment it can informed by the limited material that is available.

The Defendant points out that, in assessing loss of a chance, the court will disregard chances which are negligible. In Thomas v Albutt [2015] PNLR 29, Morgan J said the authorities support the conclusion that a chance of a more favourable outcome that was less than 10% should be considered to be negligible. Whilst this threshold is not an absolute rule, it provides a useful rule of thumb for judging what is a negligible risk in a particular case.

The first issue to consider is whether, but for the breach of duty, the Claimant and the Owners would have entered into binding agreements for the Development. This issue needs to be judged on the balance of probabilities in so far as it relates to the Claimant’s actions and a loss of a chance basis in so far as it relates to the actions of the Owners. However the evidence overwhelmingly supports the inference that the parties would have entered into binding agreements. As I indicated earlier, it is clear that both Mr Shaw on behalf of the Claimant and the Owners acted as though the Other Agreements were in fact binding. This no doubt was because they wanted to develop the Development Land through the intended joint venture. There is no reason to think that, had the Defendant acted appropriately, the parties would not have signed enforceable contracts immediately after incorporation of the LLP rather than shortly before. The Claimant easily proves this on the balance of probabilities and any argument that the Owners would for some reasons have taken objection to signing the Other Agreements a few weeks later is so implausible as not to merit a discount for the chance of it having come to pass.

The more difficult question is whether the Claimant and the Owners would, but for the Defendant’s breach of duty, have proceeded to develop the land. This is rather less straightforward and involves considering both the position of the Claimant (on the balance of probabilities) and the position of others, including the Owners (on an assessment of a chance basis).

Dealing first with the position of the Claimant, the Defendant raises two interrelated arguments as to why the Claimant would not have proceeded with the Development in any event:

In his first witness statement dated 23 January 2023, Mr Shaw deals at some length with the finances of the Claimant company and its associates. The purpose of that statement was to respond to an application by the Defendant for security for costs. In that context, it is unsurprising that the statement should seek to play up the assets of the Claimant and its associates. At paragraph 23, Mr Shaw refers to the Claimant and several associated businesses (four are named) in which, it is said, the Claimant “has a financial interest.” The statement goes on, “The Claimant and its associated businesses provide financial assistance to one another from time to time, in order to facilitate the Claimant's developments, which is dependent on sales and revenue generated from on-going development schemes.” Mr Shaw identifies that the Claimant has two general bank accounts and other site-specific accounts.

Mr Shaw explained the finances of the Claimant and associated companies further in his oral evidence. The companies named in paragraph 23 of the first statement are companies in which either the Claimant has a shareholding or with which the Claimant has acted as a partner. Each development would have a particular bank account through which monies relating to the particular development would pass. By this means the finances of the companies are, in Mr Shaw’s phrase, “micro-managed.” Capital to fund the developments might come from bank lending or from moving monies around the companies. However, the latter course requires consideration and justification. It was not simply possible to move money from one company to another to fund a short term cash need without considering whether it was in the interest of the lender to advance the money and, where the particular development involved partnership with others (the majority of the developments), consulting those others about the transfer of the money. The Claimant and associated companies might on occasions buy land, funding that from their own resources, bank funding or private investors.

As Mr Shaw explains at paragraph 32 of his statement of 15 September 2023, the Owners’ failure to proceed with the Joint Venture meant that the exact basis of the funding of the project was never determined. However, the Claimant sets out an analysis of the Development in a document at B1866 and, within his statement, Mr Shaw explain how he says the construction costs would have been funded.

Mr Shaw summarises his position in paragraph 33.2 of the statement of 15 September 2023:

“I wish to make it completely clear, that I never had any concerns whatsoever regarding the Claimant funding the Joint Venture because:

(a)

NatWest had already confirmed its willingness to fund the project, having expressed its satisfaction that the transaction fell completely within its lending parameters;

(b)

Due to the well-planned structure of the Joint Venture transaction, the loans required were relatively small. The Claimant had already paid the costs of the Initial Administrative Works and discharged the upfront payment of the License Fee to the Owners;

(c)

The majority of the construction costs for both Phase 1 and Phase 2 would have been paid from the Bank Facility and the entire Joint Venture project was therefore effectively self-funding; and

(d)

As I have indicated above, I am confident that Lloyds, Close Brothers or Edward Fox-Davies would have funded the Joint Venture as an alternative option and if not, I would have ultimately stepped in and funded it personally.”

But in cross examination, Mr Shaw volunteered that he would not have risked his own assets on the Development. He stated that he did not have the cash reserves to fund the Development himself, that his wife would have been “seriously against it” and that to do so would have “broken a golden rule.” He was pressed on how this evidence lay with his comments in the statement about funding the development if necessary. He denied that he had changed what he was saying on this issue, asserting that he would not have wanted to fund the Development himself but it would have been a “possibility.”

I found it impossible to reconcile what Mr Shaw had to say in his witness statement with what he said in the witness box. The statement in court that he would not have risked his own assets to fund the development seemed a spontaneous comment that was not aimed at achieving any particular impression in the mind of the listener. On the other hand, the passage in the statement that he would if necessary have used his own assets appears as part of a carefully drafted account as to why funding would not have been a problem on this development. I consider it highly improbable that he would have introduced his own personal funding to complete the development. Further, Mr Shaw’s reasoning, dealt with in respect of Issue 5 below, as to why the Claimant itself did not purchase the Development Land is, whilst persuasive on that issue, suggestive that Mr Shaw did not have readily available the necessary assets to purchase the land, whether in his own name, or though companies that he controlled. Accordingly I conclude that the completion of the joint venture would only have taken place with funding from a third party.

Whilst the willingness of the Claimant to proceed with the project is a matter to assess on the balance of probabilities, the ability of the Claimant to raise funding for the project was not a matter within its control, in so far as it depended on third party funding. It follows that the possibility that the proposed joint venture would have failed for lack of third party funding is to be assessed on a loss of a chance basis.

The likelihood of such funding being obtained is not easy to assess. Mr Shaw himself was confident that he would have been but my concerns as to his reliability identified above cause me to be cautious about accepting his uncorroborated word on this issue, especially when it is inevitably a statement not of what actually happened but what he believes would have happened.

Whilst I have expressed some doubt about placing reliance on the detail of Mr Shaw’s evidence about funding, I am satisfied from his evidence that he is a successful property developer who has been able to ensure that previous projects have obtained the necessary funding. His assertion that he has a “successful and unblemished track record of delivering profitable development projects with landowners using my tried and tested joint venture development model” ([9.5] of the witness statement of 15 September 2023) was not challenged. Such success in the property development market supposes a good record of being able to raise the necessary finance and is consistent with Mr Shaw’s assertion that he would have been able to raise the necessary finance here.

On the other hand, the evidence on this issue is not unequivocally in favour of the position asserted by Mr Shaw. There is evidence of potential difficulty in lending for the scheme, for example in Mr Shaw’s email to Mr Whitelaw of 14 July 2015 at B1219. As I have already identified, the Claimant is not able to demonstrate that it had a commitment to lending from any institution.

Doing the best I can on the limited evidence, I conclude that the Claimant was at a real but small risk of failing to find the relevant lending. I would put that risk at 20% and the corollary is that the Claimant had an 80% chance of being able to fulfil its side of the bargain in terms of developing the land.

The second issue relating to the Claimant’s side of the transaction was whether in fact the Claimant still wished to proceed with the scheme by 2017. There is evidence pointing both ways on this issue.

In favour of the argument that, but for the Defendant’s breach of duty, the Claimant would still have endeavoured to develop the scheme, the following matters are of particular note:

Against the Claimant wishing to proceed with the project are the following main points:

As I have indicated, this is an issue that falls to be determined on the balance of probabilities, albeit as a hypothetical rather than as an established fact. I have noted that several of the arguments that might appear to indicate that the Claimant did not wish to develop this land in any event are in fact not persuasive points. On the remaining issues, the court has relatively little to go on and inevitably, a judgement of this kind is somewhat impressionistic in nature. On balance, the evidence, in particular the enthusiasm for the scheme expressed by Mr Shaw, leans in favour of the finding that the Claimant still wished to proceed with the scheme at the time that the Owners pulled out and probably would have done so but for the problem with the enforceability of the Development Agreement.

I turn to the issue as to whether, but for their ability to argue the lack of enforceability of the Development Agreement, the Owners would have proceeded with the Development.

In favour of the argument that they would do so is that, like the Claimant, they had committed considerable time and money to this project. The full extent of that time and money is unknowable since the Owners neither gave disclosure nor appeared as witnesses in this case. But I have little doubt from reviewing the history of this matter as set out in the agreed chronology appended to this judgment that the commitment by the Owners must have involved hard work and expense on their side. Further, the Claimant makes the point that the LLP had been named after a relative of the Owners who used to own the land (see email at B1058). This is suggestive of some reasonable commitment to the project, though of course the decision to name the LLP after a relative preceded the very considerable delays that later beset the project and may therefore be a weak indicator of the Owners’ wishes by the time the issue as to the enforceability of the LLP Agreement arose.

Against the argument that the Owners would have proceeded with the Development had they been obliged to do so is their very clear desire to pull out of this deal and to sell the land rather than being involved in the Development. Whilst again, the lack of participation by or disclosure from the Owners prevents the court from having a full understanding of their position, it is understandable why they might want this. As Mr Shaw himself explained in oral evidence, the advantage to his company of development through the Joint Venture was that it diverted risk to others, particular the Owners. When asked about the risk that the Owners were bearing in the Joint Venture, he identified that, assuming the Development was funded by a loan, the loan would have been secured on the land and if the Claimant defaulted on the loan, the bank would have enforced against the land. Thus the Joint Venture model involved the Owners taking risks that would be avoided by the outright sale of the land before development.

Further, on any version of events, the Development was taking some considerable time to come to fruition. Mr Shaw himself raised the point about the length of time that the planning process was taking, for example in his email of 26 April 2016 at B2113. He said in oral evidence that the Owners had expressed concern about the slow progress and there was, as he put it, “a lot of frustration on both sides.” At paragraph 21.6 of his statement of 15 September 2023, Mr Shaw acknowledged that the delay in the planning process was causing the Owners to make what he describes as “unwarranted criticism”.

It would appear to be the delay in securing planning permission and therefore bringing the Development to fruition that lad to a series of communications between the Claimant and the Owners about the possibility of a sale of the land to the Claimant. It is necessary to deal with this issue as a discrete point of mitigation below but what is clear from Mr Shaw’s evidence is that, whether the Claimant or Mr Shaw in fact had any interest in buying the land and developing it on their own, Mr Shaw perceived that the Owners were showing some reluctance about proceeding with the Development from mid-2016 and that he thought it was desirable to make offers to buy the land. In paragraph 22.4 of his statement of 15 September 2023, he speaks of this being “a means of keeping the Owners on my side during the further period of delay” and “buying myself extra time to enable the Joint Venture to proceed.”

Mr Shaw explains in his statement at paragraph 24.1 that he became aware in February 2017 that the Owners were offering the Development Land for sale. He spoke to Mr Giles about this who said that the Owners “wanted to realise their capital from the Development Land as soon as possible.” There were several subsequent occasions on which Mr Shaw speaks of being aware that the Owners were trying to sell the land and he ultimately became concerned that they were looking for a way of getting out of the Joint Venture.

This led Mr Shaw to re-engage with the Owners about the possibility of an outright sale of the land to him. In cross examination, Mr Shaw asserted that “he knew” that the Owners were bound to proceed under the Development Agreement but that he wanted “a fallback plan” should the Development not go ahead under the Joint Venture. Of course, the deadline date in the Development Agreement meant that there was always a possibility that, even on the assumption that the agreement was binding, the Owners might rescind the agreement if a Section 106 Agreement was not entered into. But the sequence of events from early 2017, well before the imminent expiry of the deadline, shows a distinct lack of enthusiasm from the Owners in developing the land pursuant to the Joint Venture as opposed to selling it. Following negotiations in April 2017, the Owners accepted in principle an offer from Mr Shaw to buy the land for £512,500. Later, in July 2017, Mr Shaw said that he did not have the resources to proceed (see email from Mr Shaw of 17 July 2017 at B937). In cross examination, he said of the proposed purchase that the offer to buy was in fact an attempt to “keep the Owners warm” if the Joint Venture appeared to be falling through and that he was using it as a position from which he might negotiate. Regardless of whether this is correct, the willingness of the Owners to negotiate on a sale is consistent with Mr Shaw’s discovery that they were talking to other potential purchasers. Taken together, this evidence gives a strong impression that, by mid-2017, the Owners did not wish to proceed with the Joint Venture but rather were keen to sell the land outright. That of course is what ultimately happened with the sale to Artisan.

By August 2017, Mr Shaw had formed the view that the Owners were deliberately delaying signing the Section 106 Agreement and that the appointment of new solicitors to act for them was part of this plan. He expressed concern that the Owners were frustrating the Claimant’s ability to proceed with the Joint Venture (see for example the email of 25 August 2017 at B910). He later formed the view that the Owners were “generally untrustworthy and intent on satisfying their own personal gains, because they had inter alia:

It is against this background that the loss of the chance of the Joint Venture proceeding to fruition has to be assessed. Of course this counterfactual analysis supposes that the Owners were legally obliged to perform their obligations under the Development Agreement. But, by the time the issue with the enforceability of the agreement came to light, the possibility of the Owners rescinding the agreement because a Section 106 Agreement had not been put in place was obviously a real and imminent risk. Had the deadline in the Development Agreement passed without a Section 106 Agreement being in place, there is a very real chance that the Joint Venture would have failed in any event.

In these circumstances, it would have been open to the Claimant to threaten to bring or actually to bring a claim based on the argument that the Owners’ failure to sign the Section 106 Agreement was a breach of the Development Agreement (the argument probably being that there were implied terms of good faith or similar that prevented the Owners from deliberately frustrating the agreement in this way) but the prospects of success of such a case would have been uncertain. I have not heard argument on the issues that would have been engaged and one only has to state the basis for bringing such a claim in order to see the potential difficulties that such litigation would have had – in the commercial sphere, litigation based on implied terms of good faith or similar is rarely straightforward. Further, the Claimant would probably not have had the appetite to pursue that argument – after all, it did not pursue the argument that the LLP Agreement was in fact binding on the Owners, even though the vigour with which the Defendant has argued the point in this case would suggest that such an argument had at least as reasonable prospects of success and is not obviously a weaker case than an argument based on breach of duty through failing to sign the Section 106 Agreement.

Weighing these matters in balance points towards the conclusion that it is more likely than not that the Owners would in any event have found some reason not to continue with the Development Agreement, probably by not signing the Section 106 Agreement. The Defendant in its skeleton argument puts the case on the basis that “in reality, the Owners would never have executed the S106 Agreement.” In the language of loss of a chance claim, that supposes that there was no more than a negligible chance of the Owners in fact executing such an agreement. In my judgment, that overstates the strength of the Defendant’s argument on this issue. The Owners had on the face of it an obligation to sign a Section 106 Agreement. The court will normally work on the assumption that contractual parties will deliver on their promises. But the evidence that the Owners were seeking to extricate themselves from the Joint Development is so strong and the possibility of success in their attempts so real that I am driven to the conclusion that this was the Owners’ intention and that there was a real and significant risk that the Owners would have succeeded in their aim even if the Development Agreement had been enforceable.

The loss of a chance here is a somewhat technical analysis since, for any counterfactual argument that the Owners may have advanced to avoid a liability under the Development Agreement, one must consider how the Claimant would have responded (to be assessed on the balance of probabilities) and then conclude from that response what if any loss of a chance has occurred. In reality, such detailed analysis is impossible where the court inevitably has not had (and realistically could not have had) the potential scenarios fully argued out in front of it. It is therefore necessary to take an overview.

Given the compelling evidence that the Owners wished not to proceed with the Joint Development and the Claimant’s lack of enthusiasm to try to force their hand when the Owners did raise an issue with enforceability of the Development Agreement, I would assess the chance of the Joint Venture being followed through, had the Defendant not been in breach of duty and had the Claimant been able to raise the necessary finance, at 40%.

It might be argued that there are other potential issues that might affect whether the Development would have gone ahead, but all are so improbable as not to merit any further discount for the loss of a chance. Certainly no other potential contingencies have been advanced and I do not further discount for other theoretical risks.

Given my finding that the Claimant’s chance of raising the necessary finance to perform its side of the bargain and to achieve that loss of chance of profit was 80%, and given that the risk of the Claimant not obtaining the relevant finance is wholly independent of the risk of the Owners not proceeding with the Joint Development, the overall chance of the Claimant making the relevant profit was therefore the cumulative chance of the Joint Venture being followed through (40%) and the relevant finance being obtained (80%), that is 40% x 80% = 32% (Footnote: ⁹).

The issue as to why Mr Shaw did not proceed with his offer to buy the Development Land has been examined in detail above. His evidence is that he made several apparently serious offers to do so before the difficulty with the enforcement of the Development Agreement came to light. His explanation for doing so seems to have been to try to ensure that the Owners did not sell the land to others. Since his negotiations were no doubt subject to contract, he was doubtless entitled to make offers even when he did not intend to be bound by them. The Defendant contends that this reflects adversely on his credibility, though when it was put to Mr Shaw that some of his communications were lies, he responded that he was not lying but was “stringing the Owners along” or “establishing a fallback position.”

For reasons I have identified, I do not consider that the Claimant or Mr Shaw ever seriously intended to invest their own funds in this development. Their reasons for not doing so, explored above, are perfectly rational and reasonable – in essence, this is not the business model that Mr Shaw wished to pursue. Any suggestion that he might in fact have been willing to do so was merely a feature of his attempt to sustain his relationship with the Owners and to keep the Joint Venture on track. Given that his position was a reasonable commercial position to take, I am not persuaded that the Claimant can be said to have failed reasonably to mitigate its loss.

The assessment of quantum for the Claimant’s lost chance involves consideration of the profit (if any) that the Claimant would have made had the scheme at School Road proceeded. In turn that requires consideration as to the costs of the Development and the profit to be made from the sale of the properties. The former issue was addressed by Quantity Surveyors, Mr Steven Howe instructed by the Claimant and Dr Ronan Champion instructed by the Defendant. The latter issue was addressed by Valuers, Mr Mark Morison instructed by the Claimant and Mr Paul Raine instructed by the Defendant.

I have identified above three general points as to quantum that have been raised.

Within his first report, Dr Champion for the Defendant considered in section 5 whether the Claimant would in fact have developed Willow Grove at the same time as the Development land. If, as he suggests may have been the case, the Claimant would not have chosen to develop both sites concurrently, it is arguable that the Claimant has suffered no loss as a result of the failure to develop the Development Land or, at the very least, that the profit on Willow Road should be set off against any alleged loss of profit on the Development on the basis that, in the counterfactual scenario, Willow Grove would not have been developed.

This argument is by no means straightforward. Mr Shaw’s evidence is that it would have been possible to develop the sites at the same time. Further, the counterfactual scenario may have involved considering whether, with the potential for developing both sites, the Claimant would have been able to do so sequentially rather than concurrently. But in the event, this was not a point pursued by the Defendant either in opening or closing submissions. I found Mr Shaw’s evidence that he would have proceeded with both developments (if he could) to be persuasive. The chance that funding problems would have prevented him from doing so is already reflected in the loss of chance assessment referred to above. Accordingly, I find that the counter factual scenario should be approached on the basis that both the Willow Grove and the Development Land would have been developed at around the same time.

Turning to the date of development, the original positions of the Quantity Surveying experts were as follows:

In their second joint statement, these experts agreed a Tender Price Index of 333. That appears to assume Mr Howe’s mid-point of the end of 2019, given what is said at [4.2] of the first joint statement at B649 (though in his report of 12 January 2024, at [1.2.2] on B617, Dr Champion gives the same index for a mid point of mid-2020 – it is not clear whether there may be an error here). The agreement on the Tender Price Index is helpful to the calculation of quantum, though the difference on the date to which that relates may have a consequential effect on the dates for valuation of the various properties.

The valuers assume different valuation dates – those dates are staged as set out in Appendix A to the Second Joint Statement of the valuers, but in essence are in the range 2019 to 2021 in Mr Morison’s opinion and in the range 2020 to 2022 in Mr Raine’s opinion.

Given the myriad of other issues to address in the case and the fact that the difference of valuation date makes only a small difference to the figures, the parties did not address the issue in closing submissions. The obvious unpredictability of timings in contracts means that in reality it is impossible for the court to make findings of fact on the issue in the counterfactual scenario of this development having taken place. If one takes the approximate midpoint of the construction (which as I have noted is itself uncertain), the dates given by Mr Morison seem a little optimistic but the dates of Mr Raine a little pessimistic. I consider that the best approach to this issue is to take the midpoint of dates contended for by the valuation experts and to base the valuation on the midpoint of their figures, adjusted to reflect other factors as appropriate.

The third preliminary issue is as to the inclusion of the Section 73 variations achieved by Artisan in the hypothetical costings and profits of the Claimant. The Defendant has not argued with any enthusiasm that these should be excluded from the calculation. This is unsurprising. It is clear that the Claimant was trying to seek variations to the planning permission. No doubt the purpose of those variations would have been to maximise profit on the development. I see no reason to think that the Claimant would not have sought and achieved the same variations as ultimately were achieved by Artisan. Accordingly I factor those variations into my calculations.

As I have indicated, both parties instructed Quantity Surveyors, Mr Steben Howe instructed by the Claimant and Dr Ronan Champion instructed by the Defendant. Their evidence was contained in the following documents:

Each expert answered questions carefully, making appropriate concessions. The methodology used by the two experts differed. For reasons that I will identify, I found both strengths and weaknesses in each of their approaches. In light of this, I am satisfied that there is no single true answer to the question as to what the costs would have been, but rather that there is a range within which the best estimate lies. Having examined the methodology of each of the experts, I shall identify the range and indicate where within the range, the best estimate can be found (Footnote: ¹⁰).

Mr Howe’s opinion is summarised in a document comparing his figures with those of Dr Champion at B575. The figures in that document are almost the same as those in the Claimant’s updated Schedule. The similarity and differences between the claim in the document at B575 and that in the updated Schedule are:

As to Dr Champion’s opinion as summarised in B575, that is a little different from the counter schedule because account is taken of the so-called Section 73 variations. The similarities and differences between this document and the counter schedule are:

The differences between the opinion of Mr Howe and that of Dr Champion are set out in the table attached to their Supplemental Joint Statement at B575 and may be summarised as follows:

I deal first with the difference in approach as to the “per square foot” figure for building costs.

Mr Howe’s approach to calculating this figure is take an “all-in” development cost rate of £148 per square foot, this being the figure provided by the Claimant to him (as can be seen in the Schedule at B75) and to apply that to the gross internal floor area of the development (without Section 73 variations) of 22,379 ft². This gives a total figure of £3,318,039. From this, Mr Howe deducts 16% to reflect “offsite costs” a figure that is said to be representative of such costs and is drawn from the table provided by the Claimant at B5556. The drainage costs of £348,955 referred to at B669 are then deductions, giving a net figure which, divided by the total internal square footage gives the net figure of £104/ft² for the cost of building excluding drainage and offsite costs.

Mr Howe then looked to the Building Cost Information Service (BCIS) Comprehensive Building Price Book to see how the building costs therein compare with the figure that he has calculated. Applying the figures for the relevant period and relevant region, those figures show a mean figure of £119/ft² with an inter quartile range of £104/ft² to £137/ft² (see [3.3.12] on B670), which would put Mr Howe’s figure very much at the bottom of the expected range.

However it is Mr Shaw’s evidence that his company uses a model where, instead of appointing a main contractor, the developer itself enters into direct contracts with sub-contractors and directly employing labour, thereby achieving a saving of 15-20% on typical building costs.

If that discount is applied to the figures referred to at [3.3.12] on B670, Mr Howe’s figure lies in the middle of the range and appears less of an outlier.

This approach of stripping out costs other than direct build costs is helpful because the difference of opinion between the experts related to those build costs and not other costs. The drainage and offsite costs are separately added back into the total after the build costs are calculated.

Dr Champion’s approach to the build costs involves the starting point of the BCIS figure then to apply an increase to that of 15% to reflect the fact that this is a high quality scheme, giving a total figure of which he takes to be £134/ft². He then cross checks this against the Claimant’s costs for the Willow Grove development.

Mr Howe and Dr Champion have both commented on the other’s approach and each were cross examined on their approach. There are potential problems with whatever approach is taken to costing in a case such as this, as Dr Champion acknowledged in his report.

The parties have not approached this issue on the basis that the court make detailed findings of fact on all the matters underlying the costing. Rather they have each sought to persuade the court that they have the better of the argument and that, if there is a range of costings, the evidence favours their position. That is a realistic approach to an issue which, if fully litigated, would have caused the trial to be significantly longer.

The major points to be taken against Mr Howe’s approach are that it assumes the accuracy of the Claimant’s own estimate as to development costs and that it assumes a saving for the Claimant’s construction management model that is not obviously correct. The difficulties with Dr Champion’s approach are that he somewhat arbitrarily ascribes an uplift to reflect the quality of this site, appears to ascribe costs based on a brownfield development (which would be higher) to what in fact was a greenfield site and fails to reflect what Mr Shaw says is the real saving from his construction management approach.

None of the points taken by the experts are obviously wrong such as to cause me to dismiss them out of hand. I am conscious that the Claimant’s estimated development cost may be an unreliable figure and is not closely rooted in material that allows the court to examine how it is calculated. I also consider that BCIS material coupled with the obvious quality of the development (which was common ground between the parties and the experts) is likely to point to a higher build cost than might otherwise be the case. On the other hand, I accept Mr Shaw’s evidence that his construction model will achieve some saving on costs.

Balancing these factors points to a figure somewhere in the range of Mr Howe’s mean figure of £104/ft² and Dr Champion’s uplifted figure of £134/ft². Doing the best I can, I take the midpoint of those figures, £119/ft².

Turning to the issue of the correct calculation of offsite costs, the difference between the position of the parties is, as noted above, negligible. I can see no obvious basis for preferring either Mr Howe’s figure of 9.8% or Dr Champion’s figure of 9.5%. However, it would appear that the higher figure contended for by Mr Howe includes finance costs whereas Dr Champion’s lower figure may not. For reasons explored more fully under Issue 9 below, I take the higher figure for which the Claimant contends but do not separately allow for finance costs.

It follows then that, apart from the issue dealt with at Issue 9 below, the development costs are as follows:

From this figure falls to be deducted the landowner distributions both for the original development and the section 73 variations. It may also be that the licence fee of £25,000 should be deducted though the experts’ second joint statement appears to state that this figure would in any event be deducted from the Owners’ distributions so would not be deducted twice.

It is helpful to start by summarising the issues between the valuers, then setting out their respective opinions on those issues. In this respect, I draw heavily from the table in their second joint statement at B580 (Footnote: ¹²) (“the Valuation Table”.)

The differences between the experts are:

Turning to the figures in the Table at B580, it follows that the court is looking for a valuation on the basis of floor Area C, but calculated according to Valuation Date E and Valuation Date F, taking the midpoint between those valuation dates to reflect the finding above. It will be noted that, in column I, Mr Raine has given the valuation based on floor areas C but valuation date E. The valuation on date F can be calculated by adding back in deductions that he has included to reflect the lower valuation at the earlier valuation dates given by Mr Morison.

This gives the following figures:

As counsel acknowledged in their submissions, the difference between these figures is relatively minor. In reality, it is probably within the margin of error for valuation evidence, though I note that, the valuers having agreed some figures, they were unable to agree others which suggests that they consider the differences to lie outside of any margin of error.

One approach to this issue is to consider it at the same time as considering other issues as to valuation evidence as set out below. However, since there is no difference in the experts’ valuations of some properties, but there is a difference in their valuation of others, I consider this to be an unsatisfactory approach, since the court might have to take a different approach on the discount argument depending on whether the valuation of the properties were agreed. Rather, the court should seek to identify a figure bearing in mind that it is valuing at the midpoint of the valuation dates proposed by the experts and therefore inevitably it does not have direct evidence of the valuation as at that date.

Given that Mr Morison has not valued the properties at the date of Mr Raine’s valuation and that, if he had done so, he would presumably have increased the value by a similar proportion to the difference that Mr Raine has used for the difference between the earlier and later valuation dates, the court can reasonably assume that the midpoint of the range of valuation will be the midpoint of the valuation of Mr Morison on the earlier date that he takes and the valuation of Mr Raine on the later date that he takes. That leads to the following figures:

I take the figures in the right hand column of this table to represent the true valuation of the individual houses subject to the Defendant’s argument that those figures should be discounted.

Turning to the discounts for which the Defendant contends, there are two bases, in each case said to be valued at 5%:

In respect of the first issue, Mr Raine contends that there is an inevitable discount to be given to the development value reached on a theoretical basis to reflect the fact that the sales would have been, at least at the start of the development, off plan and that there are no similar developments in the area. He supports this discount by stating that he considered the gross development value for the Development Land was, by reference to the sales or properties on the Willow Grove Site, at the upper end of the valuation range.

When cross examined on the issue of the margin of uncertainty, Mr Raine says that this always applies as a discount; the uncertainty of a development would never enhance rather than reduce the market value reached by more conventional means. He emphasised that, at least where the site is “muddy” (that is to say incomplete), the putative buyer has to have regard to plans and drawings to anticipate the completed result and this will tend to depress what they would be willing to pay.

On the second issue, Mr Raine refers to the fact that the Development Land and Willow Grove would have been in competition with each other and this would have resulted in a reduction in prices on each site.

In cross examination, Mr Raine was asked about the extent to which the developer who was in control of both the Development Land and Willow Grove might have been able to control the timing of properties coming on to the market so as to minimise the effect of marketing both sites at the same time. He responded that he had worked to the phasing that he had been given for the probable completion of properties on the site (and assumed marketing that would have ensured the properties were sold once complete).

In his evidence, Mr Morison accepted the possibility of the Willow Grove development having some depressive effect on the sale process of houses on the Development Land, but he doubted that the overall impact of such uncertainties would have been as great as the 10% total discount for which Mr Raine contended. He considered that demand at the relevant time was sufficiently large in this area to absorb the impact of the two developments completing at around the same time, especially as the housing at Willow Grove was generally of a smaller size such that the two developments were not directly comparable and therefore not directly in competition.

Of course, the uncertain nature of the development could in fact have enhanced prices in the area by making it a more attractive place to live. In any event the development is not so large as to swamp the market and again the simultaneous completion of properties on two development sites might have been attractive to some purchasers. But I accept the Defendant’s contention that, on the whole, the combination of, first, the uncertainties consequent upon the fact that, at least in the early period, sales at the Development Land would be off plan and, second, that the Claimant would have been completing and marketing two developments in the same location at around the same time, would have been more likely than not to have depressed rather than enhanced prices from the theoretical gross development values on which the experts have opined and/or to have depressed the prices on the Willow Grove development from that which the Claimant in fact was able to achieve. As the Claimant has pointed out, these factors would have been less cogent in respect of the affordable units in he Development.

In order to reflect the possible combined effect on the Claimant’s overall profits of these two forces, I consider it more straightforward to give a single discount figure from the total value of all the properties on the Development Land, rather than giving a discount on the ultimate sale price of properties on the Development Land and, in addition, giving a discount for the lesser profit that the Claimant would have received on the Willow Grove site on the counterfactual scenario, though of course that discount must reflect the fact that, in the counterfactual scenario, both figures may have been depressed. I am not persuaded that an overall discount as high as 10% could be justified even having regard to the possible effect of the supply issues on the sale prices on both sites. On balance, I consider a 5% discount for the combination of these two uncertainties to be a sufficient mark of their probable effect on valuation.

Thus I find the gross development value of the Development Land, had it been completed, to be 95% of £6,670,000, that is £6,336,500.

There are three areas of additional costs which the parties contend are relevant to the quantification of the claim:

The issue that arises in respect of the first of these, the finance charges, are different than the issues relating to the other two. I deal with the finance charges first.

In his report, Dr Champion deals with the finance charges as a cost of funding the Development. He points out at [4.3.13] that, on the Claimant’s case, funding would have been necessary to complete the Development. Since it is a project specific cost, it is something that should be included in the costs of the Development. He estimates that the necessary funding would have involved borrowing £534,000 in the first year of the Development and £360,000 in the second year at an approximate cost (by way of interest) of £50,000. In the second joint statement, he refers to this issue at B572, stating that “if borrowing as part of a JV, it is estimated loan interest would amount to £50,000. If borrowing on a sole basis, loan interest would amount to approx. £108,000.”

The Claimant’s case is that the costs of funding the loan were already included in the “offsite” costs referred to above (see Mr Howe’s report at [2.2.8]). The material before the court does not allow me to work out whether in fact finance costs were included by the estimates of each expert because the percentage figures given are not broken down. Indeed, Dr Champion conceded in cross examination that in fact these costs might already have been included in the offsite costs as estimated by him. Given that the interest costs are a cost of the Development that would have to be included at some point, the best I can do is to assume that they are included but to take the Claimant’s slightly higher figure for development costs (the effect of which is of course is to reduce the anticipated profit from the Development), on the ground that I can be confident from Mr Howe’s assertion that the interest costs have been included in his figure of 9.8% but I cannot be confident that they are included in Dr Champion’s figure of 9.5%. For this reason, I make no separate discount to the claim to take account of funding costs.

On the other matters, that is to say administrative costs and legal fees, the parties take directly opposite stances. The Claimant’s case is that these costs are additional losses that ought to be added in to the claim. The Defendant contends that they are additional losses that should be deducted from the claim.

The Claimant’s case is that it has incurred fees, charges and expenses in respect of the Development which have been wasted because of the Defendant’s breach of duty. Had the Development proceeded, these costs would have “always have been incurred” but the Claimant would have been able to “offset or recover” these costs on the Development (see Mr Howe in the joint statement at B573). Thus they should be recoverable as damages.

On the Defendant’s side, Dr Champion considers that these costs are abortive development costs that relate to the Development and should be deducted from the claim.

The experts are in my judgment both wrong on the facts of this case. Whilst it is correct that abortive costs may be recoverable as a separate head of loss and that costs that would have been incurred in the Development may need to be deducted as part of those costs, the counterfactual situation here is that the Development would have gone ahead. As I have indicated, Mr Howe says that the costs would then have been incurred in any event. If this is correct, it cannot be right that they are losses that flow from the Defendant’s negligence causing the Development not to proceed that should be added to the profit that would have been realised had the Development proceeded. On the other hand, whilst they are a development cost that one might have had to discount if they had not been incurred, the Claimant has on the evidence in fact incurred such costs so to discount them as part of the claim would be to cause the Claimant to suffer twice over the loss that it would only have suffered once on the counterfactual. It follows that these costs fall neither to be added to the claim as consequential losses nor deducted from the claim as part of the costs of the Development. They play no part in quantifying the claim either way.

During the course of closing submissions, counsel for the Claimant indicated that, with the answers to the issues addressed above, it was possible for the parties to calculate the quantum of the claim. If in fact there are any outstanding matters that require determination these can be addressed as part of matters consequential upon this judgment.

It follows from the above that:

Having seen the draft judgement, the parties have suggested corrections and made submissions on points upon which they have sought clarification and consequential matters. In the Claimant’s case this has included making an application for permission to appeal. I agree that, having handed down judgment, the appropriate order is to list matters for a further hearing to deal with the outstanding issues.